Purpose-built student accommodation (PBSA) investment volumes in the UK, while slightly below the levels achieved in 2017, are currently ahead of the historic five-year average (totalling £1.9bn for Q1 and Q2), which is positive news for the market.
Demand for exposure to the sector continues to reflect a broad cross-section of investors, including traditional sector specialists, overseas capital and private equity investors, all competing against a number of institutional funds who are adopting increasingly acquisitive strategies within the student sector.
Market activity to date in 2018 has seen a number of development site transactions, reflecting continued investor confidence and appetite for growth in the student housing sector. A recent report by JLL outlines activity, including Middlesex Street in London, which Unite Students has acquired on a subject to planning basis. This development is proposed to complete for the 2020/21 academic year delivering circa 1,000 beds.
Meanwhile, Round Hill Capital is due to forward fund Watkin Jones’ Project Colorado, a collection of seven development sites providing 2,598 beds. The deal will add to Round Hill’s current holding of 7,500 beds in operation and development. Furthermore, Fusion Students’ Stellar Portfolio (comprising 1,850 beds) and Unite’s Mayflower Portfolio (comprising 3,500) are due to achieve a combined value of circa £430m, with completion dates expected in the second half of the year.
With the recapitalisation of Greystar Real Estate and PSP Investment’s Chapter Portfolios ongoing and a considerable number of regional single assets also under offer, investment volumes for the remainder of the year are projected to be in line with historic five-year average of £3.3bn.
GSA Coral’s investment portfolio in the UK market continues to progress, with key development sites in Cambridge, Exeter and Bournemouth set to complete and enter operation in 2019.
Despite the UK being a mature PBSA market, investors continue to be attracted to the sound market fundamentals. Furthermore, due to the continued investor demand and occupier supply/demand imbalance, investment returns are supported by continued positive rental growth and some yield compression.